- World’s Biggest Pension Fund Rides Stocks to $46 Billion Gain
The world’s biggest pension fund posted its fourth-straight quarterly gain, as global stocks rose and a decline in the yen against both the dollar and the euro helped boost the value of its overseas investments.
The Government Pension Investment Fund returned 3.5 percent, or 5.1 trillion yen ($46 billion), in the three months ended June 30, increasing assets to a record 149.2 trillion yen, it said in Tokyo on Friday. Domestic equities added 2.3 trillion yen as the benchmark Topix index rose in the period, while the value of foreign stocks increased by 1.9 trillion yen.
The Japanese retirement fund’s recent string of quarterly gains follows a series of losses after it overhauled its strategy in 2014 to buy more shares and cut debt. GPIF, which holds the majority of its stock investments in strategies that track indexes, benefits when broader equity markets are rising.
“With stronger stocks, we’re not seeing a repeat of trillions of yen of paper losses that we saw in the past,” said Ayako Sera, a market strategist with Sumitomo Mitsui Trust Bank Ltd. in Tokyo. “Performance is improving, but we still have to maintain a calm view.”
The fund’s Japanese share holdings returned 6.6 percent over the three months, matching the Topix’s performance. Overseas stocks added 5.5 percent, helped by a 7.6 percent drop in the yen against the euro, the biggest decline since 2013, as well as weakness versus the greenback, both of which increase the value of foreign holdings when repatriated. The MSCI All-Country World Index climbed 3.6 percent last quarter.
“A positive market environment continued” in the June quarter, with good global economic data and corporate earnings supporting increases in stocks, GPIF President Norihiro Takahashi said in a statement Friday. “The yen was in a weakening trend due to expectations that the Federal Reserve will raise interest rates and the ECB will move toward normalizing monetary policy, while the Bank of Japan’s quantitative easing policy continued.”
The fund’s domestic bond holdings, which accounted for 30.5 percent of total assets, managed a nearly flat return. Foreign bonds added 4.5 percent, making up 13.5 percent of the GPIF’s investments at the end of June.
Japanese stocks accounted for 24.4 percent of holdings, while overseas equities were 23.9 percent of assets. The target levels for GPIF’s portfolio are 35 percent for domestic debt, 15 percent for foreign bonds, and 25 percent each for domestic and overseas shares.
Alternative assets accounted for 0.1 percent of GPIF holdings, well below the allowable limit of 5 percent. A recent proposal by the health ministry to allow the fund to trade stock index futures could increase its alternative-asset holdings. The fund has also invested around 1 trillion yen into indexes that track Japanese stocks with high environmental, social and corporate governance scores.
“They’ve only lit the lantern now, but I expect this to keep expanding further,” said Koichi Kurose, Tokyo-based chief market strategist at Resona Bank Ltd. on the fund’s ESG investments.
Oil Jumps to $67.70 as OPEC+ Extends Production Cuts
Oil Jumps to $67.70 as OPEC+ Extends Production Cuts
Brent crude oil, against which Nigerian oil is priced, rose to $67.70 per barrel on Thursday following the decision of OPEC and allies, known as OPEC+, to extend production cuts.
OPEC and allies are presently debating whether to restore as much as 1.5 million barrels per day of crude oil in April, according to people with the knowledge of the meeting.
Experts have said OPEC+ continuous production cuts could increase global inflationary pressure with the rising price of could oil. However, Saudi Energy Minister Prince Abdulaziz bin Salman said “I don’t think it will overheat.”
Last year “we suffered alone, we as OPEC+” and now “it’s about being vigilant and being careful,” he said.
Saudi minister added that the additional 1 million barrel-a-day voluntary production cut the kingdom introduced in February was now open-ended. Meaning, OPEC+ will be withholding 7 million barrels a day or 7 percent of global demand from the market– even as fuel consumption recovers in many nations.
Experts have started predicting $75 a barrel by April.
“We expect oil prices to rise toward $70 to $75 a barrel during April,” said Ann-Louise Hittle, vice president of macro oils at consultant Wood Mackenzie Ltd. “The risk is these higher prices will dampen the tentative global recovery. But the Saudi energy minister is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.”
Gold Hits Eight-Month Low as Global Optimism Grows Amid Rising Demand for Bitcoin
Gold Struggles Ahead of Economic Recovery as Bitcoin, New Gold, Surges
Global haven asset, gold, declined to the lowest in more than eight months on Tuesday as signs of global economic recovery became glaring with rising bond yields.
The price of the precious metal declined to $1,718 per ounce during London trading on Thursday, down from $2,072 it traded in August as more investors continue to cut down on their holdings of the metal.
The previous metal usually performs poorly with rising yields on other assets like bonds, especially given the fact that gold does not provide streams of interest payments. Investors have been jumping on US bonds ahead of President Joe Biden’s $1.9 trillion coronavirus stimulus package, expected to stoke stronger US price growth.
“We see the rising bond yields as a sign of economic optimism, which has also prompted gold investors to sell some of their positions,” said Carsten Menke of Julius Baer.
Another analyst from Commerzbank, Carsten Fritsch, said that “gold’s reputation appears to have been tarnished considerably by the heavy losses of recent weeks, as evidenced by the ongoing outflows from gold ETFs”.
Experts at Investors King believed the growing demand for Bitcoin, now called the new gold, and other cryptocurrencies in recent months by institutional investors is hurting gold attractiveness.
In a recent report, analysts at Citigroup have started projecting mainstream acceptance for the unregulated dominant cryptocurrency, Bitcoin.
The price of Bitcoin has rallied by 60 percent to $52,000 this year alone. While Ethereum has risen by over 660 percent in 2021.
Oil Prices Extend Gains to $64.32 Ahead of OPEC+ Meeting
Oil Prices Rise to $64.32 Amid Expected Output Extension
Oil prices extended gains during the early hours of Thursday trading session amid the possibility that OPEC+ producers might not increase output at a key meeting scheduled for later in the day and the drop in U.S refining.
Brent crude oil, against which Nigeria oil is priced, gained 0.4 percent or 27 cents to $64.32 per barrel as at 7:32 am Nigerian time on Thursday. While the U.S West Texas Intermediate gained 19 cents or 0.3 percent to $61.47 a barrel.
“Prices hinge on Russia’s and Saudi Arabia’s preference to add more crude oil production,” said Stephen Innes, global market strategist at Axi. “Perhaps more interesting is the lack of U.S. shale response to the higher crude oil prices, which is favourable for higher prices.”
The Organization of the Petroleum Exporting Countries (OPEC) and allies, together known as OPEC+, are looking to extend production cuts into April against expected output increase due to the fragile state of the global oil market.
Oil traders and businesses had been expecting the oil cartel to ease production by around 500,000 barrels per day since January 2021 but because of the coronavirus risk and rising global uncertainties, OPEC+ was forced to role-over production cuts until March. Experts now expect that this could be extended to April given the global situation.
“OPEC+ is currently meeting to discuss its current supply agreement. This raised the spectre of a rollover in supply cuts, which also buoyed the market,” ANZ said in a report.
Meanwhile, U.S crude oil inventories rose by more than a record 21 million barrels last week as refining plunged to a record-low amid Texas weather that knocked out power from homes.
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